PAYROLL INSIGHT
Diana Bruce, MCIPPdip, CIPP Senior Policy Liaison Officer, provides details of 2017 Budget announcements
T he biggest bit of news from the spring 2017 Budget was the government’s u-turn on raising the level of Class 4 National Insurance contributions (NICs) for the self-employed. Income tax The Budget confirmed that the tax-free personal allowance will increase in April 2017 to £11,500, continuing its progression towards the government’s target of £12,500 in April 2020. Also confirmed was the 40% tax threshold increase to £45,000 in 2017–18. Off-payroll working – expenses As we know, from 6 April 2017 responsibility for determining whether the so-called ‘IR35’ rules apply, and the subsequent responsibility for applying those rules, transfers from the worker’s intermediary to the engager or end client where they are a public sector body. The fee-payer is the public sector employer or a third party such as an agency; however, the responsibility for administering the status test will always fall with the engager/end client even if they are not the one administering pay as you earn (PAYE) and NICs. In documents published alongside spring Budget 2017, the government confirmed that, following responses to the technical
consultation, it will be optional for the fee-payer to take into account the worker’s expenses when calculating tax due. This puts the worker on the same footing as an employee, whose employer can choose whether or not to reimburse expenses incurred. National Insurance contributions ● Class 4 NICs U-turn – The amount of NICs paid by employees and the self-employed is set to widen due to the previous Chancellor’s abolition of Class 2 NICs for the self-employed from April 2018. The self-employed also gained access to the same state pension as employees in April 2016. To address this difference, the Budget announced that the main Class 4 rate will increase from 9% to 10% of profits between the lower and upper profits limits and, from April 2019, the rate will increase by a further 1% to 11%. However, as mentioned above, this decision has now been retracted. Alongside Matthew Taylor’s review into employment practices, the government will also consider whether there is a case for parity of parental benefits between the
NICs liabilities, is being actively monitored by HM Revenue & Customs’ (HMRC’s) compliance team following reports that some businesses are using avoidance schemes to avoid paying the correct amount of NICs. Further action would follow, if deemed necessary. ● Delay in removing National Insurance from the effects of the Limitation Act – Autumn Statement 2016 announced that, from April 2018, the government would remove NICs from the effects of the Limitation Act 1980 and Northern Ireland equivalent. This will align the time limits and recovery process for enforcing National Insurance debts with other taxes. To allow more time for a full consultation on the draft legislation, the government has deferred the change, which will be introduced in a future NICs Bill. Student loans Two consultation responses were published alongside the Budget: ● The paper on postgraduate doctoral loans sought views on the technical aspects of the design of this new loan product that will come in to repayment from April 2019. ● As regards the consultation on the provision of part-time maintenance loans, the government proposes to introduce a new part-time maintenance loan for students starting a degree in academic year 2018–19. It then intends to extend this support to distance learning course and level 4 and 5 higher education qualifications
employed and the self-employed. ● Employment allowance – The
employment allowance, which employers can offset against their secondary Class 1
...optional for the fee-payer to take into account the worker’s expenses...
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| Professional in Payroll, Pensions and Reward | May 2017 | Issue 30
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